Bitcoin retreats from record after markets get inflation jolt

Los Angeles Times

12 hours ago

A stronger-than-anticipated inflation reading reminded investors that Bitcoin remains a highly volatile asset just hours after the digital currency soared to another record high.
The original cryptocurrency fell more than 4% in the minutes after a government report showed US wholesale inflation accelerated in July by the most in three years.
That sent stocks lower and tempered expectations for a reduction in interest rates, sending Bitcoin down from a high of $124,515 set late Wednesday in New York. The previous record was reached in July.
Helping to fuel the shift in sentiment were comments from Treasury Secretary Scott Bessent on Fox Business that the US would not be buying additional Bitcoin for President Donald Trump's crypto strategic reserve. Bitcoin was trading at about $118,100 as of 3:06 p.m. in New York.
Bitcoin has been steadily rising for most of the past year as a result of the friendly legislative climate in Washington ushered in by Trump. Public companies, led by Michael Saylor's Strategy, have boosted the demand by following an increasingly popular corporate tactic of stockpiling the original cryptocurrency. The playbook has recently spread to smaller competitors, like Ether, leading to a broad rise across digital assets.
Still, the retreat was quick Thursday. Leveraged bets on digital assets saw over $1 billion liquidations in the past 24 hours with $770 million and $269 million in long and short positions respectively, according to data complied by Coinglass.
'The recent pullback in crypto prices following a hotter-than-forecast reading on core PPI seems to have shaken broader confidence in a Fed rate cut next month,' said Thomas Perfumo, global economist at Kraken. 'Fundamentally, elevated inflation continues to underscore the long‑term appeal of crypto assets with fixed or programmatic supply, which are structurally better positioned to preserve, and even grow in value.'
The recent coordinated move between stocks and Bitcoin underscores how speculative market corners and mainstream benchmarks are drawing from the same well of optimism. Earlier this week, US inflation data landed in line with expectations this week — and strengthened bets the Federal Reserve will cut interest rates in September, easing financial conditions and encouraging capital to flow from blue-chip equities to volatile digital tokens. Traders pared those bets Thursday.
While Trump's January executive order did say that the government will acquire more Bitcoin via 'budget neutral' strategies, many crypto bulls assumed this would actually involve buying more tokens, not just getting them through confiscations in criminal cases. Some even speculated that the US would revalue its gold reserve and use that to buy more tokens. Bessent threw cold water on that idea.
'We're not going to be buying that, but are going to use confiscated assets and continue to build that up. We're going to stop selling that,' Bessent said on 'Mornings with Maria' on Fox. 'You know, I believe that the Bitcoin reserve at today's prices is somewhere between $15 and $20 billion.'
Bitcoin's market cap rose to around $2.5 trillion and Ether's to nearly $575 billion when prices peaked, according to CoinGecko. Ether was trading just below its almost four-year old record on Thursday, changing hands at around the $4,600 level.
Ether's rise has been propelled by sustained demand from newly active treasury firms, while Bitcoin's steadier climb has leaned on persistent exchange-traded inflows even as it has faced technical resistance. However, the second largest token has seen most of the liquidations in leveraged bets amid the sharp drawdown.
'Crypto has been positively correlated to equities with the relationship stronger for ETH than BTC,' said Chris Newhouse, director of research at Ergonia. 'General sentiment looks positive.'
Pan and Kharif write for Bloomberg.